Halister News

(Bloomberg) -- Yields will rise as Trump’s fiscal stimulus boosts growth and inflation, though higher real rates and tighter financial conditions will limit the climb in nominal 10Y yield, TD strategists Priya Misra, Gennadiy Goldberg and Cheng Chen wrote in Nov. 21 note.

• Stimulus should imply faster Fed hikes; however, uncertainty about size of fiscal package and Fed’s focus on financial conditions may lead it to hike slower than expected
  • Rise in labor participation rate suggesting “slack in the system” and low neutral rate could also lead to slower pace of hiking
  • Expects market to price in at most 2 hikes in 2017
• Rates caught between dueling Trump policies of pro-growth and protectionism
• Headline CPI to approach 2.3% by Feb. 2017; core CPI expected to “continue to steadily inch” higher
• Global reach for yield and adverse economic effects of higher rates should limit how high yields can go